For all lump-sum payments caused by the 2008 mortgage crash, used properly, such loan terms may be a viable option for lowering monthly payments, especially on expensive cars.
An example of the resurgence of lump sum payments in the automotive industry comes from Toyota Financial Services Philippines (TFSPH), which is now promoting its Balloon Payment Plus financing option as an alternative to generally more expensive car rentals.
As The Philippine Daily Inquirer reports, “Balloon Payment Plus, a unique leasing product from Toyota Financial Services Philippines (TFSPH), offers customers low monthly payments compared to regular financing; Periodic maintenance service throughout the life of the loan for worry-free maintenance, ”and an option to upgrade at the end of the loan term.
To take advantage of the program, consumers first choose a down payment equal to a down payment of 20%, 25%, or 30% of a vehicle’s Suggested Retail Price (RRP), and then decide on the length of the loan, which can be up to from 24 months to 60 months.
At the end of the funding period, consumers can refund a lump sum of up to 45% of the car’s value and own it – that’s the “balloon” – or make a trade-in.
Toyota’s main website has basic information on the Balloon Payment Plus program, which is available in markets outside of Asia, although no details are provided.
National Loans, a Melbourne, Australia-based financing broker, also promotes balloon loans for automobiles, noting in a statement, “Balloon payment auto loans are well suited for those who often like to upgrade their vehicle. If exchanging the vehicle at the end of the loan term is the buyer’s preference, National Loans recommends choosing a balloon loan in an amount similar to the cost of the current value of the vehicle and exchanging the vehicle when ‘it has reached the breakeven point. This is when the market value of the car matches the settlement amount owed. “
In an age when used cars are scarce and expensive, and with new car prices also ahead of recent years, balloon financing that offers very low monthly payments is attractive to some drivers.
In October, the Wall Street Journal (WSJ) reported that “American consumers paid an average of $ 42,368 for new vehicles in September, up 17% from the same month last year, according to a preliminary estimate. JD Power Data Provider ”.
See also: Automotive Apps Add Vehicle Financing to Acquire and Retain Customers